After revamps, success rate of Carrboro
Revolving Loan Fund improves

When Bridget Pemberton-Smith and her twin sister Wendy, co-owners of Cameron's gift store, considered moving from University Mall in Chapel Hill, they looked across the Triangle. They even looked outside the Triangle, but eventually settled on a space in Carrboro, reopening in the fall at 370 E. Main St.

Give partial credit to the Town of Carrboro, said Pemberton-Smith, which chipped in last August with $50,000 from its revolving loan fund. The program launched in 1983 to provide start-up cash to local businesses at reduced interest rates.

Over the past 31 years, the town has loaned roughly $2.3 million to 50 businesses, with interest rates ranging from 2 to 10 percent, depending on the market rates. Some recipients have come and gone. Others, such as Cat's Cradle and Weaver Street Market, have become local destinations.

But in early 2012, a spate of business closings prompted town leaders to amend the loan fund process. Of the eight businesses receiving town loans in 2009, five have closed. Of those five, Carr Mill Mall's Original Ornament jewelry and bead store defaulted on a $70,000 loan, making it the third recipient in the history of the fund to default, according to town records.

"Timing is everything," said Carrboro Board of Aldermen member Randee Haven-O'Donnell, a board liaison to the town's Economic Sustainability Commission. The commission, a panel of aldermen appointees, manages the revolving loan fund, although the Board of Aldermen has the final say on whether loans are approved.

"I think that 2007 is where we started to see some of these businesses struggle," Haven-O'Donnell said. "And then, certainly by 2008, it became apparent that the struggle was too great for some of them. It was just the overall economy."

Local governments across the state use this type of loan fund, although Carrboro prioritizes local companies and requires businesses to offer quality jobs for low-income residents.

Since the closings, town officials say they are urging loan applicants to use their own resources to pay for at least 50 percent of start-up costs. In 2012, town officials scrapped a requirement that business owners be turned down twice for bank loans before seeking Carrboro's assistance. However, Annette Stone, Carrboro director of community and economic development, says her office urges entrepreneurs to look toward banks first.

Town officials now require applicants to provide a more detailed business plan. Plus, Haven-O'Donnell said officials are pushing new business owners to enroll in entrepreneurial training through UNC-Chapel Hill or private sources.

"What they bring to us is forecasting," said Haven O'Donnell. "Because sometimes when they get into a second or third year, it may not look anymore like they had it on a spreadsheet."

In total, 12 businesses still owe more than $218,000 to the town. But since Original Ornament, no other loan recipients have defaulted. And since the 2012 loan revisions, no businesses benefitting from the loan program have closed.

"The concept of spreading the risk a little more is helpful," said Stone. "It protects the town more."

Town leaders say they are determined to continue financial assistance for local business owners. In 2012, the town launched a second loan fund—$125,000—for business owners, offering them emergency capital funds and assistance for façade improvements. Stone said no one has applied.

Meanwhile, Cameron's is doing well at its new location, according to store owners, and the loan is partially responsible for its initial success.

"Carrboro is really focused on its local businesses," said Pemberton-Smith. "That's sort of a hip thing right now, but I think Carrboro takes it to another level."